State-Owned versus Township and Village Enterprises in China

Perotti, E.C., Sun, L., & Zou, L. (1998). State-Owned versus Township and Village Enterprises in China. IIASA Research Report (Reprint). IIASA, Laxenburg, Austria: RR-99-011. Reprinted from Comparative Economic Studies, XLI(2-3):151-179 [Summer/Fall 1999] [1998]

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Abstract

This paper presents an up-to-date survey of the comparison issue between state-owned enterprises (SOEs) and township-village enterprises (TVEs) in China. Although TVEs are not at a disadvantage in areas such as technology, labor skills, education levels of staff, access to bank loans and government support, they have important advantages in ownership and governance structures, personnel systems and labor relations, and conditions of institutional arrangement. These advantages have apparently outweighed the disadvantages, allowing the TVEs to outperform the SOEs and successfully expand their market shares that previously belonged to the SOEs. However, our analysis also reveals that SOEs may not have performed so badly if their broad social contributions other than reported profits are also taken into account. In conclusion, we argue that both SOEs and TVEs need to reform their ownership and governance structures. In particular, if TVEs are to develop further during the next century, they cannot avoid the grassroots democratization.

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